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Mortgage rates drop over Coronavirus fears

Mortgage rates drop over Coronavirus fears
(Image credit: Shutterstock)

The coronavirus strikes again - this time on mortgage rates, but the connection may not be obvious. China has a heavy hand in the world economy, so whatever happens to the Chinese economy is likely to affect the economies of other countries, including that of the United States. The coronavirus has fueled fears of slower economic growth and uncertainty surrounding the virus's impact on the global economy. According to Forbes, investors have started to feel safer pulling out of the stock market amid turmoil caused by the coronavirus - you may have heard of Apple's troubles in China, for example. That means this money is likely to go into stable US Treasury bonds - and as a result, bond yields have been driven to new lows. So, this is good news if you're considering one of the best refinance mortgage companies to take out fresh borrowing on your home... let us explain why.

How bonds and mortgage rates are connected

Bonds and mortgages compete for the same kind of investors: they offer a fixed and stable return. But bonds are largely considered to be safer investments. More often than not, large organizations take out bonds. Large organizations are more likely to be able to repay their loan than individuals. Bonds are safe also because they're easy to sell and trade on a public market. Mortgage rates are closely tied to bonds - if the latter falls, so does the former. In a nutshell, the more money goes into bonds, the lower mortgage rates fall. So if you're looking to refinance now, you're likely to get a lower rate.

What does this mean for homeowners?

Experts say that if you're a homeowner or a prospective home buyer, you should look into refinancing your home or checking out one of the best mortgage lenders to take out a fresh mortgage. 

In fact, if you took out a mortgage a year ago, when mortgage rates hovered around 4.5%, you can take advantage of the new rate of around 3.9% for a 30-year fixed FHA loan. That $150 that you may be saving with the new rate can offer increased financial security for many families. 

Experts add that, if the mortgage rates stay low throughout the spring, more home buyers may flood the market and sales volume can reach a new high, causing an increase in home prices. And with Chinese property buyers being discouraged by the Chinese government from investing in international property, there may be even more real estate to choose from. After all, Chinese buyers make up the largest amount of foreign investment in US property, particularly in California and New York. 

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